Wild times, strong brands: The brand as a valuable business asset

Navigating Uncertain Times

During periods of stagflation – when economic growth slows while inflation remains high – many companies hesitate to invest in long-term strategies, preferring to focus on short-term gains.

However, it's precisely during these challenging times that allocating sufficient resources to sustainable strategies becomes crucial for maintaining competitiveness and ensuring future growth. This approach doesn't rule out short-term profits; rather, it safeguards against market volatility and provides stability. Whether through research and development or brand enhancement, these investments are vital. A strong brand image, for instance, can act as a buffer against economic fluctuations and foster customer loyalty.

The Overlooked Power of Branding

A GfK study revealed that in Germany, only 10% of marketers allocates 60 to 75 percent of their total marketing budget to short-term activities. This is significantly lower than the European average, where 72% of marketers invest more than 60% of their marketing budget in long-term branding.

This disparity is concerning, as brands with high recognition and strong identities consistently outperform market averages in terms of profit. In fact, the world’s 15 most valuable brands have a combined worth of $4.7 trillion. A brand's strength is directly tied to its potential for revenue growth and profitability. This underscores the importance of prioritizing brand development as one of a company's most crucial assets.

Brand Assets: The Hidden Treasure

So why are companies becoming less willing to invest in long-term brand building? One key reason is that brand and communication specialists are often underrepresented in the boardroom. With the wide range of tasks focusing on finance and economics, there's often little time to address marketing and the ever-changing demands on brands, especially in the digital marketplace.

A glance at the balance sheet reveals the dilemma: Brand value is usually not accounted for unless the brand has been purchased, leaving it invisible. Yet, it's the most valuable intangible asset and significantly boosts company performance. In many cases, brand value and market capitalization correlate, though the Brand Finance Germany 150 Report notes there are significant differences.

Marketers face the challenge of demonstrating – with data and insights – how brands create value and influence the intangible relationship between a company and its customers and stakeholders. Companies must internalize the understanding that success in branding is rarely visible in the short term, but rather in the long run. The brand's positive contribution to company growth and stability can be holistically derived over time through improved key performance indicators. For those seeking quicker validation, surveys on brand perception or awareness can provide data-driven proof of its relevance.

The Power of Strong Brands

It's clear why investing in sustainable brand building, rather than relying primarily on short-term, performance-oriented measures, is worthwhile:

Enhanced Customer Loyalty: Customer loyalty offers strategic and financial advantages. Loyal customers purchase more frequently, spend more, and recommend the brand to others. Consistent, positive brand experiences that increase trust foster customer loyalty, turning consumers into steadfast supporters – even during crises.

Lower Acquisition Costs: Brands that clearly communicate their mission and purpose can strategically shape customer perception. The resulting identification with the brand personality makes it easier to attract potential customers who align with the brand's values.

Optimized Product Marketing Costs: Brand awareness reduces the investment required for product launches by minimizing the need for persuasion. New products benefit from the brand's reputation – customers apply overarching brand promises and positive experiences to individual products.

Price Premium: A strong brand maintains its appeal even when consumer budgets are tight and times are turbulent – like the present.

Navigating Disruptive Market Forces: In a rapidly changing business environment, companies must cope with disruptive forces such as technological advances, shifting consumer preferences, new competitors, or regulatory changes. A strong brand creates the foundation for agility, adaptability, and innovation.

Attracting Top Talent: A strong brand also helps recruit and retain employees, directly affecting a company's financial performance. A robust employer brand can reduce recruitment costs, improve employee retention, and increase productivity.

Increasing Shareholder Value: A strong brand significantly impacts shareholder value. Studies show that companies with strong brands achieve higher market valuations and better shareholder returns.

A brand is much more than just a name or logo – it's the foundation for growth and success. Boards should prioritize the brand as one of the most important intangible assets and invest in it sustainably. Especially in volatile times like today, strong brands offer guidance and security.

Allocating resources to strengthen your own brand and create a solid basis for all marketing measures is therefore more of a business decision. Investing in building a strong brand reduces long-term costs and efforts for maintaining awareness and executing marketing projects.

Interested in learning how to build and strengthen your brand sustainably? Simply get in touch, we're here to help. With nearly 30 years of experience in brand management, you can count on our expertise.